The best ESG stocks are financially strong, investable companies that are committed to making the world a better place — while generating healthy returns for shareholders.

The COVID-19 pandemic has highlighted the critical role corporations must play in addressing the world's most pressing issues. Governments alone cannot cure disease — or halt climate change, provide safe working conditions, or close gender and racial pay gaps. Issues that threaten quality of life around the world cannot be solved solely with corporate resources and expertise.

To be a good ESG stock, a company must have a history of aligning its operations to support programs benefiting the environment, employees, local communities, and shareholders. Independent organizations that provide ESG ratings, such as MSCI and Sustainalytics, have the job of verifying that history.

Institutional investors use ESG ratings to demand high standards for corporate behavior, and you can do the same. By investing in the best ESG companies, you are supporting broad initiatives to conserve energy, reduce waste, improve working conditions, and enforce ethical business practices, among other things.

Boy holds up globe in green field.

Image source: Getty Images.

10 best ESG stocks right now

The 10 stocks in the table below deliver on two fronts. All have top MSCI ESG ratings, and all have reported double-digit annualized growth in diluted earnings per share (EPS) and net income over the past three years. This is a primary theme of ESG investing — you don't have to give up on returns to promote good corporate citizenship.

Rank

Name and Ticker

Industry

MSCI ESG Rating

Market Cap (billions)

IBD Composite Rating

IBD Relative Strength Rating

1

Salesforce (NYSE:CRM)

Software application

AA

$276.3

99

91

2

Nvidia (NASDAQ:NVDA)

Semiconductors

AAA

$533.7

99

96

3

Microsoft (NASDAQ:MSFT)

Software and infrastructure

AAA

$2,208

94

82

4

Best Buy (NYSE:BBY)

Specialty retail

AAA

$27.12

95

90

5

Pool (NASDAQ:POOL)

Leisure

AA

$18.4

99

91

6

Idexx Laboratories (NASDAQ:IDXX)

Diagnostics and research

AA

$55.28

93

88

7

Adobe (NASDAQ:ADBE)

Software and infrastructure

AA

$287.9

97

89

8

Intuit (NASDAQ:INTU)

Software application

AA

$154.5

96

82

9

Cadence (NASDAQ:CDNS)

Software application

AA

$43.65

97

89

10

Lam Research (NASDAQ:LRCX)

Semiconductor equipment and materials

AA

$87.68

96

82

Table data source: MSCI , Investors.com, Morningstar.

The MSCI ESG ranking system evaluates companies by their exposure to, and management of, material ESG risks in their industry. The scale ranges from AAA to CCC, and the leading ESG performers in each industry receive an AAA or AA ranking.

1. Salesforce

Salesforce provides customer relationship management (CRM) software — applications that help businesses use their customer information to sell more products and services.

Business highlights: Salesforce has leading market share, an experienced leadership team, and predictable, subscription-based revenues. The company caters to large corporate customers, which adds another element of stability.

Even better, that stability doesn't come at the expense of growth. The company has a long history of producing double-digit annual returns for shareholders. Its 2021 revenues of $21.25 billion marked a 24% increase over the prior year. For the quarter ending July 31, 2021, Salesforce grew its year-over-year revenue by 23%.

ESG highlights: Salesforce is targeting 100% renewable energy by fiscal year 2022 and has achieved net-zero operational carbon emissions. The company has also established a racial equality and justice task force and spent $16 million on equal pay initiatives.

2. Nvidia

Nvidia makes graphics processing units (GPUs) used in gaming consoles, supercomputers, robots, and self-driving cars.

Business highlights: Nvidia is the major GPU supplier in the gaming segment. The company is also well-positioned for long-term growth outside of gaming, with strongholds in artificial intelligence and autonomous cars.

Nvidia set revenue records in its most recent quarter and fiscal year, which ended Jan. 31, 2021. Revenues  rose 68% in the quarter ending Aug. 1, 2021, and 61% in the year ending Jan. 21, 2021, relative to the prior-year periods.

ESG highlights: Nvidia's ESG initiatives include treating people fairly, strengthening diversity and inclusion, and pursuing social change with its products. Key actions taken under these goals in recent years include:

  • Continued paying vendors and contractors even while facilities have been closed due to COVID-19.
  • Tripled the number of Black employees in the Nvidia workforce.
  • Developed the DGX SuperPOD, ranked as the fifth-most- efficient supercomputer in the world.

3. Microsoft

Microsoft is the world's largest software company and a dominant cloud platform provider.

Business highlights: Microsoft enjoys strong and growing subscription revenue from its software products. The company also owns the No. 2 spot in cloud computing with its Azure platform. Azure's success and Microsoft's active acquisition pipeline should support strong future growth.

Over the past 15 years, Microsoft shareholders have enjoyed average annual total returns of almost 18%, which includes a dividend yield of 0.75%. For the quarter ending June 30, 2021, Microsoft increased its net income by 47% over the prior year.

ESG highlights: Microsoft is a leader in energy efficiency. Supported by a new partnership with Black-owned solar company Volt Energy, Microsoft is working toward 100% renewable energy by 2025. By 2050, the company intends to offset all the carbon emissions it's produced since 1975.

4. Best Buy

Best Buy is a leading retailer of consumer electronics in North America. The company also provides services to design, set up, and maintain home media systems, home computing solutions, and more.

Business highlights: The uptick in demand for home office solutions and entertainment equipment during the pandemic has benefited Best Buy. The retailer is using its larger installed base to cross-sell service offerings, including tech support subscriptions. That side of the business has upside, especially if Best Buy moves beyond technology-specific services.

Best Buy has performed well in 2021, producing a total annualized return of 12.5% through the end of September. Longer term, Best Buy's 10-year total return is 17.6%.

ESG highlights: In 2020, Best Buy's facility in Chino, California, achieved 100% waste diversion — a milestone in the company's goal to divert all its solid waste from landfills. The company has also committed $10 million toward building teen tech centers in Los Angeles, where young people can learn about programming, design, and music production.

Family around pool at home.

Image source: Getty Images.

5. Pool

Pool sells swimming pool supplies to pool builders, contractors, retail stores, and repair companies.

Business highlights: Pool dominates its space, selling to 120,000 wholesale customers in North America, Europe, and Australia. The company has a good track record of increasing its market share, making strategic acquisitions, and improving operating efficiency.

The pandemic has increased interest in at-home recreation and swimming pools in particular, and Pool has taken advantage of the higher demand. In the second quarter of 2021, the company reported a new sales record of $1.79 billion, up 40% from the same quarter of the prior year. Operating income increased 64% to $338.6 million, with acquisitions adding $11 million to that total.

ESG highlights: Pool features Eco Select products and participates in the EPA's WaterSense program. The company publishes resources to help customers use water and handle wastewater more responsibly. Pool has also provided free swimming lessons to kids, made donations to human rights organizations, and donated thousands of trees  through the National Forest Foundation.

6. Idexx Laboratories

Idexx makes and distributes diagnostic equipment for pets and livestock, which is sold primarily to veterinarians and animal hospitals.

Business highlights: An increase in pet adoptions fueled by the pandemic has increased overall spending on pet healthcare, and Idexx has benefited. The company's leadership position and strong product development performance should fuel momentum over the next several years as adopted pets age.

Idexx has been generating more than $2 billion in annual revenues, but it expects to eclipse $3 billion in 2021. In the quarter ending June 30, 2021, the company reported 30% revenue growth and 36% EPS growth.

ESG highlights: In 2020, Idexx launched a global whistleblower policy to support compliance with the company's code of ethics. Idexx has also reduced energy consumption per square foot by 15% and decreased the indoor water use at its world campus in Maine since 2017.

7. Adobe

Adobe provides software, publishing, and cloud storage for creatives, along with marketing analytics tools for business teams.

Business highlights: Adobe is a dominant leader in digital content creation, thanks to its flagship Photoshop software, which is used by 90% of the world's creatives. Subscriptions to Adobe software provide a predictable, multibillion-dollar revenue stream. The company's newer marketing and analytics suite should drive deeper customer engagement and future growth.

Adobe's trailing 12-month revenues exceed $14 billion, up from 2020 revenues of $12.87 billion. Longer term, Adobe has returned nearly 38% annually to shareholders over the past 10 years.

ESG highlights: Adobe has achieved global gender pay parity and has invested nearly $87 million in communities to benefit 1.6 million underrepresented minorities. Half of the company's energy comes from renewable sources, and the goal is to achieve 70% renewable energy by the end of fiscal year 2022.

8. Intuit

Intuit caters to consumers and small- to mid-sized businesses. For consumers, Intuit offers TurboTax and two digital properties, Mint and Credit Karma. Businesses use Intuit's Quickbooks and related services such as payroll.

Business highlights: Intuit holds leading share positions in its two legacy segments, tax preparation and business accounting software. The company recently announced the acquisition of Mailchimp, a marketing platform geared to the small and mid-sized business customer. Mailchimp, along with the consumer-facing Credit Karma, should contribute growth to Intuit's already strong operations.

Intuit's annual revenues exceed $9.5 billion, with net income topping $2 billion. The company has been particularly strong over the past five years, delivering annualized total returns to shareholders of almost 40%.

ESG highlights: As of 2020, Intuit obtains 100% of its electricity from renewable sources. The company is also close to achieving gender pay equity in the U.S. and India, and it is consistently recognized  as one of the best large technology employers.

9. Cadence

Cadence provides software and hardware used to design integrated circuits, systems on chips, and printed circuit boards more efficiently.

Business highlights: There's an ongoing demand for custom chips, as well as chips that are smaller, faster, and more efficient. The trend, along with increased activity in 5G mobile, artificial intelligence, and autonomous cars, should drive growth for Cadence.

Over the past 10 years, Cadence has produced total annualized returns for shareholders of 32%. In the quarter ending June 30, 2021, Cadence reported $728 million in revenue, compared to $638 million in the same period of the prior year.

ESG highlights: Cadence has achieved pay equity in the U.S. based on race and ethnicity and global gender pay equity. The company is targeting a 15% emissions reduction between 2019 and 2025. Cadence also established a supplier code of conduct in 2020 to extend its governance standards throughout the supply chain.

10. Lam Research

Lam makes and services equipment used to fabricate semiconductors. The company operates in the deposition, etch, and clean steps of chip-making.

Business highlights: Lam, like Cadence, profits from the growing demand for innovative chip design. The company has 60,000 units installed across its customer base, which provides a stream of service revenue, plus valuable feedback from chipmakers that can guide future product development. That positions Lam to stay at the forefront of chip-making solutions.

Lam's revenue for the fiscal year ending June 29, 2021, exceeded $14.6 billion, compared to $10 billion in revenue for the prior fiscal year. On the 45% revenue increase, Lam grew EPS more than 70%.

ESG highlights: Lam is implementing sustainability measures throughout its organization to achieve 100% renewable energy by 2030 and net-zero emissions by 2050. The company also rolled out micro-inequities training to 98% of its workforce in 2019 to promote inclusivity in the workplace.